Company Cites Oversupply of Crude Oil for Suspension of Drilling Operations

American Eagle Energy Corp.
said Wednesday that it has suspended its drilling operations and likely won’t resume until oil prices improve, the latest sign that a glut in crude oil is stifling exploration and production across the industry.

Shares dropped 9.1% to 60 cents in light premarket trading. The stock is one of the hardest hit in the energy sector this year and approached $12 a share in November 2013.

Oil prices have plummeted in the second half of 2014 as a flood of crude from U.S. shale disrupted the global oil market, leading a host of energy companies to cut drilling, lay off workers and slash spending.

Denver-based American Eagle, a small producer focused on the Bakken and Three Forks shale-oil formations, said Wednesday that it has suspended its operated drilling budget for next year. The company said it would complete two wells it drilled in the current quarter in next year’s first quarter, which it expects to cost about $4.5 million.

For the quarter ending Wednesday, the company also cut its production outlook to 2,600 to 2,700 barrels of oil equivalent a day, down from 2,700 to 3,000 barrels. Chevron, in comparison, produced about 2.57 million barrels of net oil equivalent a day globally in its last quarter.

Overall, analysts polled by Thomson Reuters are expecting American Eagle’s loss to widen to 7 cents a share from a loss of a penny a share a year earlier, while revenue is expected to grow 38% to $18.6 million in the quarter.